Peer to peer lending gets more and more popular with every passing day. The simple fact is, consumers and small businesses enjoy the low cost loans, and investors really seem to love the returns offered through this kind of investment.
So, today, we’re going to do a comparison of the two best peer to peer lending sites to see how they stack up against each other. Those giants are Prosper and Lending Club.
This review is focused on using peer to peer for investing. If you are looking to borrow money with peer to peer lending, I highly recommend you check out this Prosper review.
Let’s Start By Comparing Overall Services
Service | Prosper | Lending Club |
|---|---|---|
Loans To Consumers | Yes | Yes |
Investing Opportunities | Yes | Yes |
Secondary Trade Market | Yes | Yes |
High Yields | Yes | Yes |
As you can see, the services offered by both of these options are just about the same. Of course, these are overall services, not minor changes within each service. We’ll go over costs and tracking later.
What About The Yields?
If you’re an investor, this is going to be one of the most important questions for you to ask. Let’s face it, if you can invest your money elsewhere and make more, chances are, that will be your better option. However, when it comes to peer to peer lending, the yields are pretty high. Here are the spreads on the yields with both Lending Club and Prosper…
Option | Low Yield Average | High Yield Average |
|---|---|---|
Prosper | 5% | 13% |
Lending Club | 6% | 11% |
The numbers listed above are not publicized by Prosper nor Lending Club. I came to these averages by reading several articles and averaging the percentage yields on a high and low range. As with any investment, there is no guarantee what your yield may, or may not be. However, by what I’ve been able to dig out, if you’re willing to risk a possible 1% in order to earn a possible 2% more, Prosper is looking like your option. However, if you’d like to stay on the safe side in case you end on the lower end of the chart, Lending Club may be best for you.
Total Dollar Amount In Facilitated Loans
The amount of loans that have been granted tells you a lot about the company. The more money that has been invested through their platform, the more popular they are. Generally, products and services only become popular if they’re good. So, lets take a look to see which option has provided more loans.
Option | Total Facilitated Loans |
|---|---|
Lending Club | $3,275,469,450 |
Prosper | $389,721,824 |
Although these numbers may seem drastically different, the truth is, Prosper is a very low estimate. Prosper has been in business since well before 2005, however, they only report total facilitated loans since 2005. Nonetheless, from all of the information I could find around the web, dollar for dollar, Lending Club facilitates more loans on an annual basis than Prosper. However, they both have an incredibly sizable audience.
Pros & Cons of the Best Peer to Peer Lending Sites
Prosper Pros – Prosper comes with incredibly high yields. They also have a secondary market to sell loans that either are not performing well or you no longer want. Another thing that I like a lot about Prosper is their online platform. Their reporting is detailed and easy to use.
Lending Club Pros – Lending Club also provides incredibly high yields. They also offer a secondary market, and an amazing online platform. What makes Lending Club unique is the risk management tools they provide. They make it easy to set a level of risk that you’re comfortable with when searching for loans. Although prosper does make it possible, it doesn’t seem to be as easy in their system as it does in Lending Club.
Prosper Cons – Risk of loss is a huge con to both Prosper and Lending Club. The bottom line is, some consumers will decide not to pay their loans. A con for borrowers is that you must have a 640 credit score or better to ask for loans. However, that negative aspect for borrowers is definitely a positive for lenders.
Lending Club Cons – As with Prosper, risk of loss is a major downside to Lending Club, as with any company in the peer to peer lending industry. Another downside to Lending Club is that it tends to take longer to find loans that are worth funding as they don’t have as strict of restrictions as Prosper has.
So, Which Option Is Better?
Truth be told, that’s a question that I can’t answer. Both of these options are very similar as far as services, yields, cost, anything you can think of. However, subtle changes in service may make it so that one option meets your unique needs better than another. Personally, If I had to pick one, I’d go with Lending Club.
However, I personally like to stay on the safe side of risks, as a company, they’ve funded more loans and their lowest returns tend to be higher than the lowest returns offered by Prosper. You have your own unique needs with investing. That being said, the final decision is yours to make.
Click here for more info about Prosper or to sign up.
Click here for more info about Lending Club or to sign up.
I used Prosper and really enjoyed it. Then my state outlawed funding loans. I just checked and I still can’t participate. It stinks because it was a nice way to get a higher return on my money, albeit with a little more risk. With that said, the 5 loans I did participate in never went delinquent.
It’s a shame that some states outlawed it. I just don’t understand. It’s definitely a great investment. Maybe the laws will work in your favor one day!
Of course it is the banks cutting you off aided and abetted by your elected officials+ lobbiest.
I bet the banks lobbied against it because it cuts them out of the picture. That’s a real shame, as it sounds like a great opportunity for folks willing to take a little investment risk.
I’m starting to really consider peer-to-peer vs. stocks as a better investment. I’d probably start with Lending Club since it appears to have more reviews.
Awesome! Don’t count out Prosper though, they really are great!
I think peer-to-peer lending sounds like a really interesting way to diversify your investments. My question is, aren’t there rules about divesting and taking your money out of the program?
Hey Liz, great question. When it comes to getting your money back quickly, this isn’t the way to go. When you invest, you’re funding a loan and the money won’t be available until the borrower pays it back. You could sell on the secondary market, but then you’ll have to accept a loss.
While I can’t use these sites because of my state’s laws, I think they are interesting. The big problem with them now is that big companies are jumping on and picking up the best loans before smaller/individual investors can get them. This leaves the bad loans and it is causing some issues. I know many people have jumped off because of these problems.
Hey Grayson, it’s a shame your state’s laws don’t allow it. And, yes you are competing with companies to fund the loans, but they can’t get to them all!
For diversification reasons, I have an equal about in both. Until there’s some type of insurance such as FDIC or SIPC, I won’t feel comfortable putting all of my money into just one.
I heard a rumor that prosper gives first crack to its institutional clients.
I had briefly considered both. However, at the time I was researching them, neither was licensed to operate in Arizona. Definitely something I will keep in mind as a future investment possibility.
Interesting review Joshua! I never really considered peer-to-peer lending as an investment but I think I just might take a look at it. Not sure if my state allows it though.
Good review. The industry is changing quickly and some of the information has changed. Both sites publish average investor returns by loan risk category and across all loans.
Lending Club has originated over $5 billion and Prosper has originated over $2 billion. In fact, it took Prosper just 6 months to originate its second billion in loans.
The p2p space is going to revolutionize lending in America, just as crowdfunding will revolutionize equity financing. Lending Club is issuing stock on the NY Stock Exchange soon and the publicity/investor money will really kick the industry into overdrive.
Hey, Sorry for the late comment but I just ran across this site. I invest with both Prosper and Lendingclub and have had decent success with both. I’m only at 5% return right now for both but that is only because I haven’t been keeping up with loans as much as I should be. When I was tracking the sites constantly and bidding on loans a lot, I was up to 9% returns. The trick to these sites is to come up with your own threshold for the types of loans you will bid on and then stick to it. That might mean you won’t bid on any for several weeks until you find one or two that meet your criteria. I have also taken a loan from Lendingclub and found it to be very easy and awesome! they offered a better loan rate than prosper did at that time. Don’t just bid by % return look at ALL the factors before deciding to bid.
One downside is not being allowed to interact with borrowers anymore. A lot of times you could get a feel for their true intentions by asking simple questions.
Also be weary of borrowers who have been past borrowers but paid off the loan in just a couple of payments. I’ve seen where these borrowers will borrow a small amount to build up trust, pay off the amount quickly then try to borrow the maximum amount only to walk away without making a single payment. There is very little recourse in these situations. Good Luck to all!
i think prosper loans need very good rating
Peer to peer lending is only a recent arrival in Australia and I’m currently looking at trying it out for the first time.
At the moment there are only two clear leaders in the market – RateSetter and SociteyOne. Wonder how long it will be before Lending Club or Propser land down under…
I have done peer to peer lending few years now and it does pay off well. I am mostly focusing on European markets and I love the fact that I can modify my options on my own. But key here as always, is to be able to invest only the money you are not afraid to loose. I love the review here, thanks so much for it!
Obviously the two are very much similar in terms and very much have a high value.It only matter which of these two you will choose.Its up to you where you are comfortable and you are very much important to you.
Prosper has changed a lot since coming back online in August 2009 (Prosper 2.0). They have recently changed their listings layout with limited borrowers’ credit history. Defaults on loans has increased since summer of 2016 causing me to open and start investing on Lending Club. If I was to looking for extra income I would suggest Lending Club. Prosper is making it more difficult to use their website.